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HT Media: Healthy growth in other businesses - Views on News from Equitymaster

HT Media: Healthy growth in other businesses

May 19, 2011

HT Media announced the fourth quarter results of financial year 2010-2011 (4QFY11) The company has reported a 21.7% YoY and 11.8% YoY increase in top line and net profits respectively. Here is our analysis of the results

Performance summary

Top line increased by 21.7% YoY on back of robust revenue growth from the radio, entertainment and advertising segments. For the full year, revenues grew by 24%.

Operating margins declined by 5% YoY during the quarter. For the FY11, there was a fall in operating margin by 0.4%.

Net profits grew by 11.8% YoY during the quarter and 33% YoY during the full year 2011.

Financial performance snapshot

(Rs m)

4QFY10

4QFY11

Change

FY10

FY11

Change

Net sales

3,865

4,704

21.7%

14,392

17,861

24.1%

Expenditure

2,937

3,828

30.3%

11,630

14,503

24.7%

Operating profit (EBDITA)

928

876

-5.6%

2,762

3,358

21.6%

EBDITA margin (%)

24.0%

18.6%

19.2%

18.8%

Other income

31

117

277.4%

146

291

99.3%

Interest

71

71

0.0%

295

236

-20.0%

Depreciation & amortisation

180

220

22.2%

707

842

19.1%

Profit before tax

708

702

-0.8%

1,906

2,571

34.9%

Profit before tax margin (%)

18.3%

14.9%

13.2%

14.4%

Exceptional items

-

-

14

-

Tax

230

166

-27.8%

544

713

31.1%

Profit after tax before moinority

478

536

12.1%

1,348

1,858

37.8%

Share of minority

5

7

(11)

49

Profit after tax

473

529

11.8%

1,359

1,809

33.1%

Net profit margin (%)

12.4%

11.4%

9.4%

10.4%

No. of shares (m)

235

Diluted earnings per share (Rs)*

7.7

P/E (x)

20.7

(*trailing twelve month earnings)

What has driven performance in 4QFY11?

Topline rose by 22% over the corresponding quarter last year led by a strong growth of 20% YoY and 81% YoY from its advertising and radio businesses respectively. For the full year, revenues grew by 24% YoY on the back of 22% YoY growth in advertising.

The internet business has also been doing well and clocked in revenues of Rs 37 m for this quarter. Shine.com and HT campus.com are some of the websites that operate under this segment.

Operating profits took a hit by 5.6% in Q4 and the operating margins reduced by more than 5%. This was mainly because the company is in an expansionary phase and incurred higher expenses for advertising and sales promotion. Operating profits over the full year grew by 22% YoY with raw material costs rising by 31% YoY.

Cost breakup

(% of sales)

4QFY10

4QFY11

Change

FY10

FY11

Change

Raw materials consumed

1,155

1,648

42.7%

4,760

6,250

31.3%

% sales

29.9%

35.0%

33.1%

35.0%

Staff cost

631

766

21.4%

2,520

3,009

19.4%

% sales

16.3%

16.3%

17.5%

16.8%

Advertising cost

270

385

42.6%

1,159

1,353

16.7%

% sales

7.0%

8.2%

8.1%

7.6%

Other expenses

881

1,029

16.8%

3,191

3,891

21.9%

% sales

22.8%

21.9%

22.2%

21.8%

Total expenditure

2,937

3,828

11,630

14,503

The readership for the English daily ‘Hindustan times' grew 2% q-o-q and it maintained its top position in Delhi with a significant lead over competitors in the premium segments. Mint, the English business daily, is now at no 2. in this segment. It enjoys a readership of 24% in Delhi, Mumbai, Bengaluru and Kolkata.

Net profits grew by 12% YoY despite the decline in operating profits on account of higher other income and lower tax expenses.

What to expect?

With the Indian economy expected to do well in the future, print media will continue to be one of the key beneficiaries. HT Media's foray into new businesses like internet and radio are also doing well at the moment. The company is expecting significant revenue contribution from Mint and the Mumbai edition of the English newspaper in the future. At the current price of Rs 155, the stock is trading at a multiple of 21 times its trailing 12-months earnings. We are in the process of revising our estimates and will update our research report on the company within next 30-45 days.

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